Full Form of GST

Full Form of GST is Goods and Services Tax 

After COVID 19 pandemic, GST collection has been adversely affected which has resulted dispute over payment of state GST share.

The Union government’s decision to borrow Rs 1.10 lakh crores and end the dispute over the payment of compensation to state governments for the shortfall in the collection of Goods and Services Tax (GST) is welcome. The borrowing will be effected under a special window and the money will be passed to the states as back-to-back loans and will not impact the fiscal deficit targets of either government. The Centre will service the loan and then repay it from the GST compensation cess, which will be extended beyond the scheduled term of 2022. Earlier GST Council was unable to find a way out of the dispute on how to bridge the estimated shortfall of Rs 2.35 lakh crores in the GST collection for this fiscal. The Centre had suggested that the states will borrow Rs 1.10 lakh crores, which it said was the share of the shortfall due to the implementation of the unified tax system, though it was mandated to bridge it as per the GST (Compensation to States) Act 2017. Union finance minister Smt. Nirmala Sitharaman’s attempt to wash her hands off it, blaming it as an “act of God” did not help the matter either. Dissenting states including Chhattisgarh and Kerala, have made it clear they are in no mood to relent. They want the Centre to borrow the entire Rs 2.35 trillion this fiscal citing bleak fiscal position. Opposition MPs demand that GST dues to states be cleared, in their protest during the monsoon session of Parliament on September 17, 2020. Controversy around the goods and services tax (GST) compensation payment to states has refused to die down. A day after the Centre changed its stance and agreed to borrow Rs 1.1 trillion and lend to states in lieu of the promised compensation payment, dissenting states including Chhattisgarh and Kerala have made it clear they are in no mood to relent. They want the Centre to borrow the entire Rs 2.35 trillion this fiscal citing bleak fiscal position. While Chhattisgarh Finance Minister T S Singh Deo told Business Standard there should not be a bargain on the issue by the Centre, Kerala Finance Minister Thomas Isaac argued that the matter on how much of compensation was to be deferred to 2023 was not resolved. Chief ministers of Congress-ruled states met to discuss the way forward on the GST issue. Former finance minister P Chidambaram tweeted on Friday that while he welcomed the change of heart (of the Centre), there was no clarity on who will borrow the Rs 1.06 trillion and how the debt will be serviced and repaid. Meanwhile, Union Finance Minister Smt. Nirmala Sitharaman wrote to states, pointing out that they will get unconditional access to resources worth Rs 2.16 trillion in the current fiscal under Option 1, which is about 90 per cent of the total estimated GST revenue shortfall of Rs 2.35 trillion. With states eligible to borrow an additional 0.5 per cent of gross state domestic product unconditionally under this proposal amounting to Rs 1.06 trillion and Rs 1.1 trillion borrowing under the ‘special window’, Sitharaman pointed out that it will more than cover the funds that they would have received in FY21 if the total compensation were paid in full. Under this option, the entire principal and the interest on Rs 1.1 trillion, will be repaid via compensation cess collection, which has now been extended beyond June 2022. However, states demanded that the remaining sum of Rs 1.06 trillion should also be borrowed by the Centre and the interest and principal on that should be covered by the compensation cess. They argued that his amount should also not reflect under the states’ debt like in the case of Rs 1.1 trillion. Sitharaman highlighted in the letter that the central government is facing serious budgetary constraints and the central fiscal deficit this year will be far in excess of what was budgeted. Chidambaram, in his tweet, said, ‘’States are opposed to borrowing on their own account. States are right. Centre must resolve the impasse immediately is no difference between the first amount and the second amount. Centre must resolve the impasse immediately by offering the same terms for Rs 1.06 trillion as it has now offered for Rs 1.1 trillion.” Chhattisgarh FM Deo said, “Either it is a constitutional position that the Centre should accept with full grace and responsibility and compensate states for the entire shortfall or say that they don’t agree with the Constitution.” Isaac said, ‘’Negotiate  on this point and come to a consensus. Provide full compensation payment of Rs 2.3 lakh crore this year. Since under the new arrangement additional borrowing does not affect the fiscal deficit of the Centre, why should it hesitate to borrow the full amount,” he argued. The Union finance ministry had on Thursday said the entire Rs 1.1 trillion estimated shortfall arising on account of GST implementation (excluding Covid losses) would be borrowed by the Government of India in appropriate tranches and would be passed on to the states as a back-to-back loan in lieu of GST compensation cess releases. It will avoid differential rates of interest that individual states may be charged for their respective state development loans and will be an administratively easier arrangement, it pointed out. The offer came three days after the second part of the 42nd GST Council meeting remained inconclusive even as the Centre operationalised borrowing for 21 states that picked Option 1. Kerala had threatened legal action against the Centre after the GST meeting. Official sources pointed out that Reserve Bank of India had urged the Centre against borrowing by states as it would have been impossible to provide loans at a uniform rate to all states.